January 27th, 2026

SACCOs have been part of Kenya’s financial system since the 1940s, evolving into important financial institutions serving 7.4 million members by the end of 2024. Post-independence, SACCOs have been instrumental in supporting financial inclusion for the unbanked within key economic sectors such as agriculture and education, financing various development needs, largely in land and housing. In 2024, about 25% of regulated SACCO loan books financed the land and housing sector. Recognizing SACCOs’ pivotal  role in housing finance, the SACCO Societies Regulatory Authority (SASRA), the Kenya Mortgage Refinance Company (KMRC), and FSD Kenya commissioned this market study. The study aims to better understand how SACCOs participate in housing finance and how their impact can be enhanced, using data and research to drive the insights.  

A mixed-method approach was used, combining loan portfolio analysis, management interviews, document reviews, borrower focus groups, and desk research. The assessment covered loan product structures, lending processes, member experiences, and the policy and market environment. Findings were synthesized into recommendations to strengthen SACCO participation in the affordable housing value chain. 

For this study, 46 of the regulated SACCOs in Kenya with a strategic focus on land and housing were shortlisted and 33 contacted. Of this selected pool, 24 SACCOs participated in study meetings, 20 shared land and housing loans data required for the study, and 19 datasets were viable for analysis. The data requested was a list of all outstanding loans classified under land and housing and mortgage finance economic sub-sectors, with 17 data fields per loan covering borrower, loan, and property details. However, most of the participating SACCOs faced challenges in easily extracting all requested data fields from their core banking systems. As a result, data provided had varying levels of completeness i.e., some SACCO datasets did not include all outstanding land and housing loans, while others lacked certain data fields. 

All SACCOs that participated in the study were deposit-taking institutions, with majority classified as ‘larger tier’ by asset size (84% of participating SACCOs had assets above KES 5 billion in 2023); and government-based by common bond and membership composition (58% were government-based, mainly serving teachers and public sector employees). Collectively, they operated branches in 75% of Kenya’s 47 counties based on branch network coverage, with the highest concentration in Nairobi and Kiambu counties. 

The SACCOs that shared financial statements recorded strong balance sheet and profit growth and maintained generally sound regulatory compliance between 2022 and 2024. Loans to members, deposits, net interest income, and profits all posted double-digit compounded annual growth on average within this period. Average statutory ratios remained well above minimum thresholds but asset quality varied i.e., 46% of SACCOs had non-performing loan (NPL) ratios below the 5% recommended threshold in 2024, while 31% had ratios exceeding the threshold by 2–6 percentage points. Between 2022 and 2024, 12 SACCOs reported a marginal rise in dividends and interest on deposits as they sought to attract and retain members. The State Department of Cooperatives recently cautioned against payout policies that are misaligned with financial performance and legislation prohibits payouts that risk compliance with prudential requirements. From the comparison of the core capital-to-total assets ratios of the 12 SACCOs with their declared dividends and interest over the last three years, it cannot be concluded that these payouts are likely to deplete core capital, as the ratios were maintained above statutory limits with an average buffer of over 5% for most. 

Supply-side: Land and housing loan Portfolio analysis and findings 

Participating SACCOs land and housing loan portfolios shared were analysed across custom product categories defined for this study based on intended use of funds. Key findings from data analysis include: 

• Borrower profile: Most land and housing loan borrowers are male, aged 36–55, earning KES 100,000 or less, with different borrowing patterns noted based on borrower age, income, and gender. Mortgages were more popular among younger members (36–45), while those aged 46–55 mostly had general development loans. Male borrowers received well over 50% of loans in 76.5% of the SACCOs that shared gendered data, likely mirroring higher male membership in SACCOs (58% of overall SACCO membership was male according to a 2019 report by SASRA). With over 70% of borrowers earning below KES 100,000 monthly, there is a clear need for products that match borrowers’ repayment capacity while satisfactorily addressing their housing finance needs.
• Loan products: SACCO members use a wide range of loan products to finance land and housing. Development loans dominate due to their role as flagship SACCO products, flexibility, and lower incidental costs. Mortgages are a new addition to the SACCOs’ product offering and therefore not yet as entrenched; uptake is gradually increasing driven by their longer tenors and lower pricing (for KMRC mortgages). 
• Loan purpose/ sub-sector: Plot purchase is the leading use of funds for SACCO land and housing loans, followed by construction, largely through incremental building. Most members buy land for future development, and many borrowers with lower incomes may only manage to finance construction through incremental building using a series of multiple small development loans. A structured incremental building product that can be refinanced could improve affordability to better meet member needs. 
• Loan features/ terms: Majority land and housing loans are modest in size ranging from KES 100,000–1.5 million, moderately priced at interest rates of 10–16%, with repayment periods of 2–8 years. These features varied widely, depending on the product category e.g., mortgages average at longer tenors of 9–10 years, lower interest rates below 10% due to KMRC refinancing (~60% of participating SACCOs could access KMRC financing), and larger principal amounts of KES 7.5–8 million. Other mortgage products not refinanced by KMRC are priced slightly higher, ranging between 12% and 18%. Short-term emergency loans are still being used to finance land and housing needs despite being the least cost-efficient for property investment, with some annualised rates exceeding 30%. SACCOs that have not already can apply to SASRA for longer loan tenors beyond the traditional 84-month average period. 

• Security and regional coverage: Guarantors are still the main type of loan security used for SACCO loans, with property-based security mostly limited to mortgage products and land purchase loans. Lenders favour urban collateral for its marketability, leaving borrowers seeking to construct in remote areas forced to seek guarantors despite having property that is not considered ‘acceptable’ as collateral. 

• Loan performance/ risk classification: Majority of SACCO land and housing loans shared are classified as ‘performing’, with less than 2% in the ‘loss’ category. More construction loans (~15% of the loans) were classified under various non-performing categories likely stemming from challenges encountered during construction. 

Supply-side: SACCO lending process and key operational factors 

To identify key points of optimization for increased lending for land and housing, the study reviewed the SACCOs’ lending process, strategic partnerships, risk management, and use of technology. Key findings include: 

• SACCO mortgage lending follows a structured, multi-step process that includes borrower screening, property valuation, credit appraisal, legal charge registration, repayment monitoring, and, if necessary, recovery. While it helps maintain loan quality by balancing risk management and borrower needs, timelines are often longer than guarantor-backed lending due to addition of valuation and legal charge registration to the process. Besides a lengthier, more tedious process, closing costs of 9-10% of the loan value (legal and valuation fees, stamp duty etc.) also deter some borrowers. Strong monitoring post-disbursement and flexible grace periods help to keep early delinquency low. However, if foreclosure is required, the process can take at least 219 days to initiate sale by auction – a major challenge to loan recovery among lenders. 

• Long-term mortgages help to improve affordability of monthly payments for borrowers, however, SACCO management struggle to commit capital to building the initial mortgage portfolio for refinancing due to the opportunity cost of allocating the capital to higher-margin products. Other loan products offered by SACCOs for development usually have shorter tenors and higher margins over the cost of funds compared to these affordable mortgages. This opportunity cost is a key point of consideration for some SACCOs originating mortgage portfolios especially for initial refinancing. A pre-financing or bridge facility could prove useful in catalysing adoption and scale-up. 

• SACCO credit risk management remains largely retrospective – most strategies focus on current risk factors rather than default prediction, presenting an opportunity for SACCOs to adopt use of predictive analytics and stress testing tools more widely to support early warning systems for potential defaults and timely remedies. Credit Reference Bureau (CRB) reports are used by SACCOs for credit appraisal but reporting to CRBs is inconsistent limiting completeness of data held by credit information systems and strength of credit assessments in Kenya. SASRA is moving to mandate full-file reporting through regulation to improve this. Interest in alternative-data credit scoring is growing, involving use of alternative data, such as mobile phone messages, to evaluate creditworthiness. 

• Core banking platforms enable end-to-end lending, but data integration gaps blunt their impact on data-driven decision-making. Many SACCOs still mix manual and digital processes or store certain data points e.g., collateral details, only in electronic document format, making it difficult to extract unified loan datasets pulling from multiple data registers and electronic or physical documents. As such, some SACCOs revert to manually filling in spreadsheets for uses such as KMRC refinancing, which will become impractical for larger portfolios. Some core banking systems are outdated, having been installed in 2016/17 and now require upgrades, which should consider provisions for easy automation of data extraction and strategic analytics for decision-making. 

• SACCO strategies emphasize general growth in membership, deposits, and loans over sector-specific targets. Strategies focused on increasing lending for land and housing purposes largely focus on partnerships, with KMRC as the main target. Collaboration with housing cooperatives is underused due to regulatory ring-fencing as cooperatives are not regulated by SASRA. 

• SACCOs can increase awareness and utilisation of available subsidies such as the mortgage interest tax relief to drive mortgage uptake. 

Demand-side: Focus groups findings 

Discussions with members from participating SACCOs — through an in-person focus group and virtual meetings — were used to highlight the demand-side factors influencing uptake and use of land and housing loans. Key observations include: 

• Member satisfaction with SACCO loans hinges on clear communication, flexible terms, and quick processing. When these fall short through misinformation, rigid lending rules, or slow processing, members hop to new SACCOs or borrow elsewhere. 

• Loan term preferences vary by borrower profile. For salaried borrowers, tenor preference is driven by the effect of tenor on monthly loan payments with a desire to lengthen the tenor such that the monthly payments match their rental expense. On the other hand, self-employed members prefer shorter tenors to manage cashflow risk and unlock re-borrowing capacity in a shorter timeframe. Most participants favour property-backed loans over guarantors to maintain privacy in home financing decisions and due to difficulty in securing guarantors, but the view may be biased as most attendees had mortgages. 

• High interest rates, opaque closing costs, and continuous valuation requirements during the life of the mortgage drive costs up, suggesting opportunities for standardisation, optimized buy-and-build product structures, and comprehensive upfront fee disclosure. 

• Understanding of mortgages is fairly high, but knowledge gaps remain on product scope, process, and KMRC’s role. Some members had misconceptions around the scope of mortgages, expecting lenders to finance and help manage pre-construction and construction processes. Awareness of KMRC mortgages was moderate, with some participants being completely unaware of their existence and others being confused about KMRC’s ownership and role in affordable housing finance. This underscores the need for stronger borrower education, clearer product messaging, and proactive communication by SACCOs.  

• Increased member mobility across SACCOs is raising competitive pressure i.e., previously, consumers stuck to one SACCO regardless but more recently with increasing consumer choice and information access, moving from SACCO to SACCO in search of better services and more suitable products is common. This also influences how SACCOs secure younger membership; the youth respond best to investment-oriented products that can compete with other financial products available across different types of financial institutions and can guarantee early retirement from salaried jobs. 

Enabling environment findings 

Enabling environment factors affecting loan uptake were assessed to uncover factors outside of SACCOs control that if addressed could unlock barriers to uptake of financing for land and housing purposes. Key findings include: 

• Rising salary deductions and property transfer charges are eroding SACCO members’ mortgage affordability. Increased payroll deductions such as the Affordable Housing Levy, National Social Security Fund (NSSF), and Social Health Authority (SHA) have reduced net incomes and lowered loan amounts members can qualify for, forcing compromises in home size or delaying home ownership. At the same time, hikes in property transfer costs such as stamp duty and land search fees, often enforced without adequate notice add to home ownership closing costs. These trends not only restrict homeownership but also increase the risk of repayment stress as members’ disposable incomes shrinks. 

• Structural housing market constraints limit SACCO mortgage uptake despite demand. A shortage of ready, affordable housing combined with SACCOs’ reluctance to finance off-plan projects due to quality and delay risks keeps many members from using mortgages for outright purchases. Rising construction costs, driven by taxes and supply chain pressures, are outpacing borrower capacity, often leaving projects incomplete. Poor infrastructure in peri-urban areas, limited land registration and titling in rural areas, and restrictions around lending against rural collateral further reduce the viability of collateral-backed lending, especially outside major urban centres. 

• SACCOs face competitive and operational barriers that weaken their mortgage market position. Commercial banks’ greater lending capacity and aggressive marketing of KMRC-backed loans give them an edge over SACCOs in mortgage lending. 

Closing summary 

SACCO-led housing finance in Kenya faces both structural and operational barriers that, if addressed, could unlock significant gains in access, affordability, and sustainability. The study highlights critical gaps such as opportunity cost considerations in building initial portfolios of long-term affordable mortgages for refinancing; geographic concentration of affordable collateral-backed lending in urban areas for risk management purposes; and inefficiencies in foreclosure processes. These issues limit the sector’s ability to meet diverse member needs. Other challenges, including inconsistent knowledge on mortgage products, features and processes especially among client-facing SACCO staff; incomplete disclosure of closing costs; and limited awareness and utilization of tax incentives, further constrain uptake. External factors such as infrastructure gaps, escalating construction costs, and rural land ownership complexities also weaken the marketability of collateral and restrict financing options in underserved rural areas. 

Targeted interventions at both policy and institutional levels can improve SACCOs’ ability to adequately meet member housing finance needs. Recommendations include establishing a pre-financing facility to enable SACCOs originate initial mortgage portfolios before refinancing; ensuring implementation of existing incentives to offset closing costs; and streamlining the mortgage processes as well as SACCO staff product and process knowledge. Developing structured incremental construction products and launching targeted borrower awareness campaigns could enhance member experience and portfolio quality. Coordinated action among SACCOs, KMRC, government agencies, and development partners is essential to achieving broader and more equitable homeownership outcomes. A summary of recommendations provided is available in the full report. 

Download the full Leveraging SACCO data and research to strengthen the financing of the affordable housing value chain by the SACCO sector report here

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